Following Israel's credit rating downgrade by Moody's, senior officials in the Finance Ministry are taking action to avoid further downgrades from other major rating agencies, namely Standard & Poor's and Fitch.
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To address this concern, Accountant General Yali Rothenberg has scheduled meetings with senior officials from both agencies in London this week. During these meetings, the accountant general, along with Treasury officials, will emphasize that Moody's decision was premature. They will highlight the resilience of Israel's economy, the rapid economic recovery since the onset of the war, and the government's proactive measures to prevent a decline in the deficit. These measures include planned tax increases, such as VAT and health tax, set to be implemented in January next year.
Rothenberg is also planning to hold meetings with various investors in Europe, aiming to convince them to invest in Israel's bonds while assuring them of the absence of default risk, as Israel has consistently met its financial obligations for the past 75 years.
According to economic analysts on Sunday, the accountant general will need to clarify to the rating agencies and investors the confrontational language employed by Finance Minister Bezalel Smotrich toward Moody's economists. They will also elaborate on the approval process of the new state budget for 2024, scheduled to pass through the Knesset during the second and third readings in the coming days, and emphasize that the budget includes measures necessary due to the ongoing war.
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Prime Minister Benjamin Netanyahu with Finance Minister Bezalel Smotrich
(Photo: Amir Cohen / Reuters)
During an interview in the Ynet Studio on Monday, Smotrich said that "Moody's is an economic rating agency, and I fully support their assessment of the economy. Moody's actually commends the Israeli economy, highlighting its resilience and rapid recovery over the past three months."
Smotrich additionally contended that "Moody's also praises the steps we, as a government, are taking in the budget, both in the 2024 budget and the forward-looking steps we are taking for 2025." Indeed, the rating agency acknowledged the government's implementation of tax increases announced, while simultaneously drawing attention to the weaknesses in both the government and the Knesset as contributing factors in their decision.